Sinopec shuts Guangzhou crude unit for 20 days -sources

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Published October 01, 2012

| Reuters

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BEIJING – China's Sinopec Corp <0386.HK> has started shutting down a processing unit at a subsidiary refinery in Guangzhou, two industry officials said, preparing for safety and environmental checks after state media reported environmental problems.

The shutdown began on Saturday at the crude unit, which will be down for at least 20 days and the plant, Sinopec Guangzhou Petrochemical, has to divert at least one imported crude cargo into storage, one official with direct knowledge of the plant's operations told Reuters.

Sinopec, Asia's largest refiner, ordered the closure last Wednesday of three subsidiary plants in the southern province of Guangdong, including two refineries and a small petrochemical plant, after state media said they violated environmental rules.

The other refinery, the 100,000-bpd Zhanjiang Dongxing refinery where the shutdown of the whole plant began on Thursday, could also be down for weeks, said a third official, adding that it also had to divert imported oil shipments into storage, or cut imports.

Sinopec has not said when the two refineries will be closed, or for how long. But officials estimated that a closure of both plants for three weeks would cut supply of diesel fuel by 400,000 metric tons.

That is a significant gap to be bridged by Guangdong province, the country's largest oil consuming region, which burns roughly 650,000 metric tons of diesel a month.

"Sinopec is under lots of media and social pressure to close the plants, but at the same time the company is worried that such sudden shutdowns would cause fuel shortages," said the first official.

Sinopec has yet to decide whether to shut down the whole Guangzhou plant, which has total crude refining capacity of 270,000 bpd, after China's National Day week of holidays ends on Oct 7.

The Guangzhou plant is part of listed Sinopec Corp, while Dongxing is part of Sinopec Group.

Though Chinese fuel demand grew much more slowly this year than last, fuel stocks have thinned over the past months as refineries, which struggled to reflect crude costs in regulated pump prices, curbed production.

By the end of August, fuel stocks were down for the sixth month in a row, with diesel inventory levels roughly sufficient to cover 19 days of demand and gasoline 27 days.